Abstract

This chapter describes and assesses proposals to create alternatives to intellectual property for stimulating innovation that, unlike grants, are based on ex post assessments of inventions. Prize systems award money to the first or best to accomplish specified goals, while reward systems allow payments proportional to contribution. Design issues are considered, including the timing of payments, whether payments should be fixed or dependent on government assessments, whether the system should complement or replace traditional intellectual property, and whether a system should be designed for particular areas of inventive activity (such as pharmaceuticals) or applied more generally. The most important issue is that of valuation, and the chapter considers a variety of strategies for valuing contributions, including administrative assessment of ex post demand for inventions and the use of market mechanisms such as auctions. Effects on innovation and commercialization incentives are also explored.